In the upside-down world of New York City, numbers can be deceiving.
The nation's largest publicly owned hospital system is facing a $313 million deficit and expects to eliminate 4,000 jobs from a staff of 32,385 during the next four years. Yet Standard & Poor's last week upgraded its credit rating to BBB from BBB- and removed it from CreditWatch.
The upgrade was firmly grounded in the city's solid backing of New York City Health and Hospitals Corp., the city's public healthcare system. The rating agency last fall raised the city's own credit rating to A from A-. But in its own right, HHC has a solid legal structure that offers strong debt-service coverage, S&P said.
"Things are not as bad as they sound," said Luis Marcos, M.D., president of the 11-hospital system. HHC also includes four long-term-care facilities, a home health agency, a 67,000-member HMO and a network of nearly 100 outpatient clinics.
Marcos boasted that under his helm in the fiscal year ended June 30, 1996, HHC operated in the black for the first time in its 31-year history and continued to do so in the ensuing years. Most recently, in fiscal 1999, HHC posted a profit of $16 million on revenue of $4 billion; in 2000 there was a profit of $9 million on $4.2 billion in revenue.
But through a combination of a large spike in the number of uninsured patients, flat Medicaid reimbursement rates and a 16% rise in pharmacy costs, the situation began unraveling this year, said Marcos, who has headed the system for five years.
On the inpatient side, Medicaid reimbursements still make money for the system, but in the clinics HHC loses an average $100 on every outpatient visit, Marcos said. That creates quite a conundrum for a system with a mission to provide quality care and keep patients out of the hospital.
"This place needs a shrink," said Marcos, a former practicing psychiatrist, smiling weakly.
The system is eliminating more jobs and uniformly charging $10 administrative fees in its pharmacies. In the future, it may be necessary to consolidate some of the clinics, he added.
"It's like losing weight. At the beginning it's easier, but there is a point where you can't continue to downsize," Marcos said. "But we're not disappearing."